The Reserve Bank of India’s Monetary Policy Committee has begun its October meeting, with markets closely watching the possibility of an interest-rate increase. Economists surveyed by Reuters expect the RBI to raise the repo rate by 25 basis points, from 5.25% to 5.50%. If implemented, it would be the first repo-rate increase in nearly four years.
The expected policy shift comes as inflationary pressures have increased while India’s economic growth remains strong. Consumer inflation reached 4.82% in August, above the RBI’s medium-term target of 4%. Rising crude-oil prices and uneven agricultural production are among the factors creating additional pressure on prices.
A rate hike could affect borrowers, businesses and savers. Home-loan and other floating-rate borrowers could face higher interest costs if banks pass on the increase. On the other hand, higher deposit rates could benefit savers. The RBI’s final decision is expected on October 7.
The central bank will also assess economic growth, inflation expectations, global interest rates and movements in the Indian rupee before deciding its policy stance. The decision is expected to be closely followed by financial markets and businesses across the country
